Istanbul -- Turkey's stock market plunged yesterday and some short-term interest rates soared to more than 1,200 percent in a financial crisis that analysts fear could spread to Russia and other struggling economies.

Turkish officials began emergency talks with the International Monetary Fund, urgently asking for a

$5 billion loan. The money would help counter a rush to sell Turkish lira that threatens to undermine the country's precarious economy and its coalition government.

Turkey's stock market has lost nearly 40 percent of its value in the last two weeks, including yesterday's plunge of 8 percent.

The government has already placed 10 troubled banks in receivership. According to sources familiar with the talks, the IMF is pressing Turkish officials to take over and close more of the country's 81 banks, a politically difficult step in which powerful owners would lose their investments. In return, the government would guarantee all or most of the depositors' funds.

The crisis began almost two weeks ago as there were growing revelations of banking scandals. Investors, both foreign and Turkish, are moving their money out of markets here as they lose confidence in the country's future and worry about the effect a devaluation of the lira could have on their holdings.

The timing is particularly embarrassing for Turkey, which is seeking entry to the European Union. Despite the bad news, EU officials finalized an agreement yesterday on economic and other reforms that Turkey must make to be considered for membership.

"There is a real possibility this could spread to Russia and Eastern European countries," said Dani Rodrik, a professor of international economics at Harvard University's John F. Kennedy School of Government.

Russia is particularly vulnerable, Rodrik and others said, because it is a major trading partner with Turkey.

Banks in Germany -- which have invested heavily in Turkey's efforts to sell off state-owned companies and in its economy in general -- have suffered drops in their share prices due to the Turkish crisis.

The flow of investment funds out of the country has led the central bank to spend at least $6 billion of its reserves in the last two weeks "defending" the lira -- buying the currency to offset the downward pressure on its value caused by investors selling it to buy dollars and leave the country. Holding the lira's value steady is seen as key to maintaining confidence.

Analysts fear that if the IMF does not quickly give Turkey its requested $5 billion emergency loan, the government could soon run out of foreign reserves and be unable to support the lira.